Exports survive the odds
Despite a global slowdown, Egyptian exports have held their ground. Niveen Wahish reviews a recent report on the progress of this vital sector
Almost two years have now passed since the Ministry of Foreign Trade (MOFT) launched its export promotion strategy in August 2001. Since then, the local and global economic scenes have witnessed many changes. The ministry recently issued a report evaluating the status of Egyptian exports within the context of international and local events.
Efforts by both the ministry and exporters have succeeded in easing the negative effects of the slowdown in global trade and related services in 2001, which was brought on by the global recession, 11 September and the bearish global stock markets, the report said.
In fact, the value of Egypt's non- oil exports increased by seven per cent in 2001/2002 to reach $4.7 billion, compared to $4.4 billion in the previous year, representing a 30 per cent rise over the average size of exports during the past five years. However, oil exports fell by 28 per cent down to $1.9 billion due to global fluctuations in oil prices.
This improvement in exports of manufactured products comes amidst a drop in global exports of goods and trade-related services. According to World Trade Organisation (WTO) figures cited by the MOFT report, exports of goods fell globally by four per cent in 2001 to register $6.2 trillion, compared to $6.4 trillion the year before.
Average growth rates of exports had hovered at around six per cent during the past 10 years. In 2001, the exports of the Middle East and Africa fell by nine per cent to $239 billion, representing less than four per cent of total global exports.
According to the WTO, Egyptian exports account for 3.2 per cent of African exports. Mining and energy exports represent 60 per cent of African exports and 75 per cent of Middle East exports, while agricultural goods represent 13 per cent of African exports and two per cent of Middle East ones.
Overall, the global situation was not favourable to developing countries. Since their export activity depends on the business cycle in industrial countries, they were the worst hit by the fluctuations in global product prices in 2001. The prices of raw materials and oil exported by developing countries fell more sharply than those of manufactured goods. While oil prices fell by 14 per cent and those of coffee and cotton by 30 and 20 per cent respectively, the prices of finished products, which are developing countries' core imports, fell by a mere two per cent on average. In the report's view, this has led to trade deficits in developing countries. In addition, the cost of trade-related services increased due to the risks associated with global events, which, in turn, reflected on their cost of trade.
Egyptian exports would have probably fared better had conditions been more favourable. Egypt was affected by the drop in global demand in general, and particularly from its two main export destinations, the US and the EU, who account for two-thirds of Egypt's commercial transactions. Also, the increased cost of freight and insurance affected Egypt due to its geographical proximity to the area of political tension.
Nonetheless, according to Central Bank of Egypt figures, the trade deficit shrunk in 2001 by 17 per cent to $8.7 billion, compared to $10.5 billion in 2000. This has been attributed to the drop in imports by 10 per cent to $15.8 billion and the rise in non-oil exports by four per cent to register $4.7 billion.
Egyptian exports were also given a helping hand as the pound dropped in value against the dollar and the dollar, in turn, fell against other major currencies. The structural and legislative reforms to encourage exports, the report said, coupled with the efforts to open new markets and promote Egyptian goods also helped boost exports.
During 2002, a number of new legislation were introduced to deal with various problems in the export sector. Foremost among those is the Export Law 155/2002 and the modifications to the Customs Law 66/ 1963. For one, a "white list" of serious exporters was drawn up that exempted its members from presenting banking collateral to benefit from the drawback system. The temporary release period for imported inputs was also extended to two years and the customs refunded one month after the goods are exported.
Further efforts are underway to streamline the drawback system, review the high tariffs on some raw materials for which no collateral exists and unify customs on industrial inputs.
In 2002, a ministerial committee was set up to raise the competitiveness of Egyptian exports. This committee is mandated to remove obstacles to exporting and to coordinate between the various authorities in facilitating the export process. An Export Development Fund was established to raise the competitiveness of Egyptian exports through the funding of marketing studies.
Al-Ahram Weekly Online : 10 -16 April 2003 (Issue No. 633)
Located at: http://weekly.ahram.org.eg/2003/633/ec3.htm